"We are bringing an indoor design sensibility outdoors,” says Nick Arambula, Neighbor CEO.
The pandemic was very good for the home furnishings industry in general and the outdoor living market in particular. Consumer spending on furniture grew 22% from 2020 to 2021, from $148 billion to $180 billion, according to the Bureau of Economic Analysis.
Market size information on the outdoor furniture market is sketchy, but there is every reason to believe that outdoor furniture sales kept pace or even exceeded that.
For example, a 2021 consumer survey conducted by Wakefield Research found that 34% planned to purchase a lounge or chaise for outdoors, 28% dining tables and chairs and 19% a sofa or sectional.
It added up to a huge win for outdoor furniture brands and retailers, as consumers invested more in their outdoor living spaces.
One could say Nick Arambula, Mike Fretto and Chris Lee were either prescient or lucky in October 2020 when they stepped away from Tuft and Needle DTC mattress company, now owned by Serta Simmons Bedding, to launch outdoor furniture brand Neighbor.
Right place, right time
Neighbor shot to profitability in record time and just secured its first Series A funding by Strand Equity, a next-gen investment firm co-founded by Seth Rodsky and Ted Schwartz.
Ever on the lookout for emerging lifestyle trends, the companies it’s backed are heavy into healthy foods, beauty and lifestyles, including Oatly, Happy Family, Hippeas, Real Good Foods, Vital Proteins, Youth to the People and Sweaty Betty.
In Neighbor, Strand sees a cutting-edge brand with a unique difference that has high-growth and profit potential in a rapidly expanding market. And Strand was drawn to the energy and perspective the company’s founders bring to outdoor living.
“Nick, Mike and Chris are industry veterans with complementary skill sets that will enable Neighbor to take advantage of a unique market opportunity. We were impressed by the team’s track record and vision of building an enduring brand,” said Strand Equity partner Kevin Chen in a statement.
After working together for four years at Tuft and Needle, the Neighbor partners have proven to play well together. “We have complementary skills and developed a great appreciation for working side-by-side,” says Nick Arambula, who fills the CEO slot at Neighbor.
At Tuft and Needle, Arambula was head of retail strategy then moved to COO. Fretto was design director and fills that role at Neighbor and Lee headed up supply chain and operations, experience which proved valuable as Neighbor was immediately confronted with the supply chain crisis.
“We just decided it was time to do something entrepreneurial together and wanted to go after an industry that was exciting to us. Plus we wanted to stretch our design sensibilities where it will show, not like in mattresses where the design is hidden under sheets and comforters,” Arambula shares.
Mattress learning moves outdoors
On the surface mattresses and outdoor furniture don’t seem to have much in common, but underneath there are many parallels.
“We are stepping out of an industry where shipping large furniture direct-to-consumer was the norm and that works well for us,” Arambula says. “And comfort is at the forefront in both categories. That’s what we do at Neighbor.”
Both industries are highly fragmented, which lends itself to disrupting DTC brands that bring something new to the shopping experience and product offerings. And both are barbell-shaped industries, with the weight on low-cost, lower-quality offerings at one end and extremely high-price, high-design at the other.
They saw white space in the middle. “We wanted to match the elevated customer shopping experience, high-quality sustainable materials, comfort, durability and design at the high end but at a price point that is more palatable,” he explains.
Its fabrics are supplied by Sunbrella, the leading name in premium outdoor furniture, and it uses Forest Stewardship Council (FSC) certified teak wood and lumber from recycled milk jugs from Polywood.
The company’s design approach also sets it apart. “We are bringing an indoor design sensibility outdoors,” he continues. “We looked at the outdoor industry closely and found a lot of outdoor furniture has looked basically the same for the last 25 years.
“We wanted to do something that would stand out, so our first design was something that would fit beautifully into the family room and have the same level of comfort. That ethos will continue to run through everything that we do as a brand going forward.”
Part of the new funding will go toward expanding its product range. And they just brought on a fellow Tuft and Needle veteran, a classically-trained architect, to continue developing functional and beautiful furniture. The company also has a patent pending on a modular design.
Consumers were ready
Consumers appreciated the Neighbor difference immediately. “After launching online in October 2020, we went into 2021 with a budget based on what we expected to sell. Then in January, we met our budget on the fifth day. We were blown away with the demand that we saw last year and the feedback we’ve gotten from customers is they’ve found something really special,” Arambula says.
Its sleek Haven design is the company’s best-selling collection and the most common basket is a sofa ($2,500) with two matching chairs ($1,100 each) in the neutral Canvas colorway.
“The popularity of light-colored fabric surprised us because people get nervous about light-colored furniture. But it looks beautiful with the teak and the Sunbrella fabric is the best in the business and gives customers confidence it will withstand the elements,” he continues.
Besides supporting its own DTC channel, Neighbor is also sold through Crate and Barrel, Houzz and Huckberry, the outdoor men’s gear brand. It is also looking at the possibility of physical retail distribution but that is further down the line.
“It is really important to pick the right partners that appreciate the difference in what you are doing,” Arambula says.”We are trying to build a brand, not just supply outdoor furniture to retailers like everybody else. If we do go with a retail footprint, we want to do something to set ourselves apart and get our name out there so customers understand who we are as a brand.”
Building a brand
Coming from outside the industry, the Neighbor team brings a fresh perspective to the outdoor furniture market. And their experience working with Tuft and Needle to disrupt a stale, inbred industry and backed up by the support of forward-thinking Strand Equity partners, Neighbor is poised to make a big splash in the outdoor living market.
“We are fresh and new in the market like Tuft and Needle was,” says Chris Lee, Neighbor COO and head of operations. “It’s not so dissimilar to mattresses. We are simply moving from one room in the home to another, bringing the indoors outdoors.
“There are thousands of regional and independent retailers in the industry offering the same designs iterated over and over again. We have a fresh perspective on outdoor furniture. And we’ve learned the ropes of how to service large furniture purchases on the internet very effectively delivering great customer experience, great product quality and great design,” Lee concludes.
